Section 6159 allows the IRS to enter into written agreements with taxpayers allowing the payment of tax in installments. Section 7121 allows the IRS to enter into closing agreements with taxpayers. Section 7122 allows the IRS to compromise on any civil or criminal case under the tax code. Section 7123 provides the appeals dispute resolution procedures under which either the taxpayer or the IRS Appeals office may request non-binding mediation for any issue still open after appeals or after failed attempts to produce a closing agreement or compromise.

IRS Publication 4345 provides guidance on the tax treatment of payments that an individual receives from the settlement of a lawsuit. Whether settlement proceeds must be included in income depends on all the facts and circumstances in a given case. Tax Analysts publishes numerous IRS and court documents, along with analysis, on the taxation of various settlement payments. A taxpayer's payment of liabilities incurred to settle a lawsuit may also be deductible as ordinary and necessary business expenses under section 162 (LTR 201412002).